Sunday, Jan 20, 2008
Is this the quarter when banks finally admit all of their problems?
MSN MoneyCentral: The next banking crisis on the way
Nah. The banks and other financials have more losses from the subprime-mortgage mess on their books that they haven't yet confessed. Worse, the mortgage debacle has spread to other types of debt, with banks and other financial companies reporting mounting losses in their credit card and auto loan portfolios. And worst of all, the next big leg of the crisis -- the one I think will mark the true bottom -- has just started.
As the economy slows, the default rate is rising for corporate debt, especially for the high-risk, high-yield corporate debt called "junk" by many of us. That's opening a Pandora's box of potential write-downs that could dwarf the losses in the mortgage market.
Posted by lvmreader @ 08:28 PM (542 views) Add Comment
4 Comments
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1. lvmreader said...
First they came for the Commercial Mortgage Backed Securities.............
And I did not speak out because I was not a Commercial Mortgage Backed Security
Then they came for the Commercial Paper
And I did not speak out because I was not Commercial Paper
Then they came for the Residential Mortgage Backed Securities.
And I did not speak out because I was not a Residential Mortgage Backed Security
Then they came for the Credit Card Receivables
And I did not speak out because I was not a Credit Card Receivable
Then they came for the Autoloans
And I did not speak out because I was not an Autoloan
Then they came for me...
2. lvmreader said...
The Good News and the Bad News about Synthetic CDOs
Evil Pension Fund Manager (EPFM but written EPMF): [Brooklyn Accent] Mr Schmo, about your pension I have some bad news and some good news.
Joe Schmo (JS): [Looking worried] Well what's the good news?
EPMF: Well it's like this. We had a little bit of a problem. We lost all your pension money. It's gone. That's it. And there's nothing anyone can do.
JS: Eh! WTF! And you say that's they good news. How the f**k is that good news?
EPMF: Well we still got our 10% cut.
JS: [Ashen faced] Well what's the bad news?
EPMF: We need your house. Well actually it now belongs to (rustling papers) The Government of Kyrgyzstan
JS: [Now angry] But I paid off that house with 40 years of lowly paid productive labour. I have never even HEARD of Kyrgyzstan, let alone invested there.
EPMF: Well it's like this: There is a group of products called CDOs which involve slicing and dicing loans. We invested in Synthetic CDOs and it turns out that MBIA and AMBAC got downgraded and now we have no insurance. So the buyers of the slices of the CDO are now on the hook for 7 times the amount they invested. So that means you and your house..... Hey! Mr Schmo!, what you doing?!....AAAAAAAARGH
JS:[Sound of chainsaw starting] I'll show you some slicing..........................
3. lvmreader said...
http://articles.moneycentral.msn.com/Investing/JubaksJournal/TheNextBankingCrisisOnTheWay.aspx?page=1
4. Retired Banker said...
lvmreader:
You are an absolute hoot!.
Keep it up.